Module 5: Technical Analysis Tools (Done)

Question 1

What is technical analysis?

Answer 1

Technical analysis is the study of charts and indicators to forecast future stock movements, based on statistics gathered from day’s trading activities.

Question 2

What is fundamental analysis?

Answer 2

Fundamental analysis is the study of many long term qualitative factors ranging from subjects such as microeconomics and macroeconomics and industry conditions with the goal of analyzing a securities anticipated fluctuations. Information such as who the CEO or CFO is becomes important and so does the earnings of a particular company.

Question 3

Explain how David Green uses moving averages.

Answer 3

• Moving averages are arguably the most important tool when it comes to technical analysis
• Moving averages act as points of support and resistance

Question 4

What is support?

Answer 4

With respect to moving averages, support is a point in which a stock dips to one of our EMAs. This usually indicates that the stock has reached a low point, and we will want to buy the stock.

Question 5

What is resistance?

Answer 5

With respect to moving averages, resistance is a point in which a stock rises to one of our EMAs. This usually indicates that the stock has reached a high point, and we will want to sell the stock.

Question 6

What are the four different EMAs that David Green uses?

Answer 6

• 9 period EMA
• 15 period EMA
• 65 period EMA
• 200 period EMA

Question 7

What are the 9 period and 15 period EMAs used for?

Answer 7

• These EMAs will only be used for trend trades, for the most part
• They are less conclusive than the 65 EMA and 200 EMA due to measuring averages more frequently and thus more erratically

Question 8

What are the 65 period and 200 period EMAs used for?

Answer 8

• These EMAs are the main sources of finding support and resistance
• The 65 period EMA is usually the first barrier to indicate that it may be time to buy or sell
• The 200 period EMA almost always indicates that it is time to buy or sell

Question 9

What should you do if there is no moving average above where the stock is trading (i.e. you can’t find levels of resistance by using moving averages)?

Answer 9

• Expand the timeframe
• Go from the 5 to 15 to 30 and so on

Question 10

What do we buy and what do we sell when talking about moving averages?

Answer 10

We buy support and sell resistance.

Question 11

What is RSI?

Answer 11

RSI compares the magnitude of recent gains and losses over a specified time period, measuring the speed and change of price movements of a security. It is primarily used to indicate overbought/oversold levels.

• David classifies overbought levels as having an RSI of over 80
• David classifies oversold levels as having an RSI of less than 20

Question 12

What does David Green classify the 200 EMA as?

Answer 12

A brick wall.